NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
1 – Business
Nature
of operations
Western
Uranium & Vanadium Corp. (“Western” or the “Company”, formerly Western Uranium Corporation) was incorporated
in December 2006 under the Ontario Business Corporations Act. On November 20, 2014, the Company completed a listing process
on the Canadian Securities Exchange (“CSE”). As part of that process, the Company acquired 100% of
the members’ interests of Pinon Ridge Mining LLC (“PRM”), a Delaware limited liability company. The
transaction constituted a reverse takeover (“RTO”) of Western by PRM. Subsequent to obtaining appropriate
shareholder approvals, the Company reconstituted its Board of Directors and senior management team. Effective September 16,
2015, Western completed its acquisition of Black Range Minerals Limited (“Black Range”).
The
Company has registered offices at 330 Bay Street, Suite 1400, Toronto, Ontario, Canada, M5H 2S8 and its common shares are listed
on the CSE under the symbol “WUC.” On April 22, 2016, the Company’s shares of common stock began trading on the
OTC Pink Open Market, and on May 23, 2016, the Company’s common stock was approved for the commencement of trading on the
OTCQX Best Market. Its principal business activity is the acquisition and development of uranium and vanadium resource properties
in the states of Utah and Colorado in the United States of America (“United States”).
On
June 28, 2016, the Company’s registration statement became effective and Western became a United States reporting issuer.
Thereafter, the Company was approved for Depository Trust Company eligibility through the Depository Trust and Clearing Corporation,
which facilitates electronic book-entry delivery, settlement and depository services for shares in the United States.
On June 29, 2018, the shareholders of the Company approved the
name change of the Company from “Western Uranium Corporation” to “Western Uranium and Vanadium Corp.” The
name change became effective in Ontario, Canada on October 1, 2018; thereafter on October 4, 2018 Western's shares started trading
under the new name on the CSE and OTCQX and the Company announced the name change by news release.
Note
2 – Liquidity and going concern
The Company has incurred continuing losses from its operations
and as of September 30, 2018, the Company had an accumulated deficit of $5,873,301 and working capital of $1,030,632.
Since inception, the Company has met its liquidity requirements
principally through the issuance of notes and the sale of its shares of common stock.
On May 4, 2018, the Company completed a private placement of
909,622 units at a price of CAD $0.68 (USD $0.53) per unit for gross proceeds of CAD $618,543 (USD $481,560). Each unit consisted
of one share of common stock and a warrant to purchase one-half of one share of common stock. Each warrant is exercisable at a
price of CAD $1.15 and expires two years from the date of issuance.
On July 30, 2018, the Company completed a private placement
of 2,525,526 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,717,358 (USD $1,319,096). Each unit
consisted of one share of common stock and a warrant to purchase one-half of one share of common stock. Each warrant is exercisable
at a price of CAD $1.15 and expires two years from the date of issuance.
On August 9, 2018, the Company completed a private placement
of 1,907,088 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,296,820 (USD $1,000,000). Each unit
consisted of one share of common stock and a warrant to purchase one-half of one share of common stock. Each warrant is exercisable
at a price of CAD $1.15 and expires two years from the date of issuance.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
Note
2 – Liquidity and going concern,
CONTINUED
The
Company’s ability to continue its operations and to pay its obligations when they become due is contingent upon the Company
obtaining additional financing. Management’s plans include seeking to procure additional funds through debt and equity financings,
to secure regulatory approval to fully utilize its ablation technology and to initiate the processing of ore to generate operating
cash flows.
There
are no assurances that the Company will be able to raise capital on terms acceptable to the Company or at all, or that
cash flows generated from its operations will be sufficient to meet its current operating costs and required debt service. If
the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of its
planned product development, which could harm its financial condition and operating results, or it may not be able to
continue to fund its ongoing operations. These conditions raise substantial doubt about the Company’s ability to
continue as a going concern to sustain operations for at least one year from the issuance of these condensed consolidated
financial statements. The accompanying condensed consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
Note
3 – SUMMARY OF Significant Accounting Policies
Basis
of Presentation and Principles of Consolidation
The
accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10–Q and Rule 10 of Regulation S–X. Accordingly,
they do not include all of the information and notes required by accounting principles generally accepted in the United States
of America. However, in the opinion of the management of the Company, all adjustments necessary for a fair presentation of the
financial position and operating results have been included in these statements. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual
Report on Form 10–K for the fiscal year ended December 31, 2017, as filed with the SEC on April 2, 2018. Operating results
for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for
any subsequent quarters or for the year ending December 31, 2018.
The
accompanying condensed consolidated financial statements include the accounts of Western and its wholly-owned subsidiaries, Western
Uranium Corporation (Utah), PRM, Black Range, Black Range Copper Inc., Ranger Resources Inc., Black Range Minerals Inc., Black
Range Minerals Colorado LLC, Black Range Minerals Wyoming LLC, Haggerty Resources LLC, Ranger Alaska LLC, Black Range Minerals
Utah LLC, Black Range Minerals Ablation Holdings Inc. and Black Range Development Utah LLC. All significant inter-company transactions
and balances have been eliminated upon consolidation.
The Company has established the existence of mineralized materials
for certain uranium and vanadium projects. The Company has not established proven or probable reserves, as defined by the United
States Securities and Exchange Commission (the “SEC”) under Industry Guide 7, through the completion of a “final”
or “bankable” feasibility study for any of its uranium projects.
Use
of Estimates
The
preparation of these condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements and revenues
and expenses during the periods reported. By their nature, these estimates are subject to measurement uncertainty and the
effects on the financial statements of changes in such estimates in future periods could be significant. Significant areas requiring
management’s estimates and assumptions include determining the fair value of transactions involving common stock, assessment of
the useful life and evaluation for impairment of intangible assets, valuation and impairment assessments on mineral properties,
deferred contingent consideration, and the reclamation liability, valuation of stock-based compensation, valuation of available-for-sale
securities and valuation of long-term debt. Other areas requiring estimates include allocations of expenditures, depletion and
amortization of mineral rights and properties. Actual results could differ from those estimates.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Foreign
Currency Translation
The
reporting currency of the Company, including its subsidiaries, is the United States dollar. The financial statements of subsidiaries
located outside of the U.S. are measured in their functional currency, which is the local currency. The functional currency of
the parent (Western Uranium & Vanadium Corp. (Ontario)) is the Canadian dollar. Monetary assets and liabilities of these subsidiaries
are translated at the exchange rates at the balance sheet date. Income and expense items are translated using average monthly
exchange rates. Non-monetary assets are translated at their historical exchange rates. Translation adjustments are included in
accumulated other comprehensive loss in the condensed consolidated balance sheets.
Revenue
Recognition
The
Company leases certain of its mineral properties for the exploration and production of oil and gas reserves. The Company accounts
for lease revenue in accordance with ASC 840 “Leases”. Lease payments received in advance are deferred and recognized
on a straight – line basis over the related lease term associated with the prepayment. Royalty payments are recognized as
revenues when received.
Fair
Values of Financial Instruments
The
carrying amounts of cash, restricted cash, accounts payable, accrued liabilities, and notes payable approximate
their fair value due to the short-term nature of these instruments. Marketable securities are adjusted to fair value at each
balance sheet date based on quoted prices which are considered level 1 inputs. The reclamation deposits, which are reflected
in restricted cash on the condensed consolidated balance sheets, are deposits mainly invested in certificates of deposit
at major financial institutions and their fair values were estimated to approximate their carrying values. The
Company’s operations and financing activities are conducted primarily in United States dollars and as a result, the
Company is not subject to significant exposure to market risks from changes in foreign currency rates. The Company is exposed
to credit risk through its cash and restricted cash, but mitigates this risk by keeping these deposits at major financial
institutions.
ASC
820 “Fair Value Measurements and Disclosures” provides the framework for measuring fair value. That framework provides
a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the
highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and
the lowest priority to unobservable inputs (level 3 measurements).
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Fair
value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer
a liability in an orderly transaction between market participants. Fair value is a market-based measurement that is determined
based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is
used to prioritize the inputs in measuring fair value as follows:
Fair
Values of Financial Instruments
Level
1 Quoted prices in active markets for identical assets or liabilities.
Level
2 Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities
in markets that are not active, or other inputs that are observable, either directly or indirectly.
Level
3 Significant unobservable inputs that cannot be corroborated by market data.
The
fair value of the Company’s financial instruments are as follows:
|
|
Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1)
|
|
|
Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2)
|
|
|
Significant Unobservable Inputs (Level 3)
|
|
Marketable securities as of September 30, 2018
|
|
$
|
5,049
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities as of December 31, 2017
|
|
$
|
3,123
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Income
Taxes
The
Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. The provision for income
taxes is based upon income or loss after adjustment for those permanent items that are not considered in the determination of
taxable income. Deferred income taxes represent the tax effects of differences between the financial reporting and tax basis of
the Company’s assets and liabilities at the enacted tax rates in effect for the years in which the differences are expected
to reverse.
The
Company evaluates the recoverability of deferred tax assets and establishes a valuation allowance when it is more likely than
not that some portion or all the deferred tax assets will not be realized. Management makes judgments as to the interpretation
of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In management’s
opinion, adequate provisions for income taxes have been made. If actual taxable income by tax jurisdiction varies from estimates,
additional allowances or reversals of reserves may be necessary.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Income
Taxes, continued
Tax
benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized
upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s
tax returns that do not meet these recognition and measurement standards. As of September 30, 2018 and December 31, 2017, no liability
for unrecognized tax benefits was required to be reported.
The
Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component
of general and administrative expense. There were no amounts accrued for penalties and interest for the three and nine months
ended September 30, 2018 and December 31, 2017. The Company does not expect its uncertain tax position to change during the next
twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals
or material deviations from its position.
The
Company has identified its federal tax return and its state tax returns in Colorado and Utah as its “major” tax jurisdictions,
and such returns for the years 2014 through 2017 remain subject to examination.
The
Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate
tax rate from 35% to 21%. As December 31, 2017, the Company had made a reasonable estimate of the effects of the Tax Act. This
estimate incorporates assumptions made based upon the Company’s current interpretation of the Tax Act, and may change as
the Company may receive additional clarification and implementation guidance and as the interpretation of the Tax Act evolves.
In accordance with SEC Staff Accounting Bulletin No. 118, the Company will finalize the accounting for the effects of the Tax
Act no later than the fourth quarter of 2018. Future adjustments made to the provisional effects will be reported as a component
of income tax expense in the reporting period in which any such adjustments are determined. Based on the new tax law that lowers
corporate tax rates, on December 31, 2017, the Company revalued its deferred tax assets.
Stock-Based
Compensation
The
Company follows ASC 718, Compensation - Stock Compensation, which addresses the accounting for stock-based payment transactions,
requiring such transactions to be accounted for using the fair value method. Awards of shares for property or services are recorded
at the more readily measurable of the fair value of the stock and the fair value of the service. The Company uses the Black-Scholes
option-pricing model to determine the grant date fair value of stock-based awards under ASC 718. The fair value is charged to
earnings depending on the terms and conditions of the award, and the nature of the relationship of the recipient of the award
to the Company. The Company records the grant date fair value in line with the period over which it was earned. For employees
and management, this is typically considered to be the vesting period of the award. For consultants the fair value of the award
is recorded over the term of the service period, and unvested amounts are revalued at each reporting period over the service period.
The Company estimates the expected forfeitures and updates the valuation accordingly.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
Note
3 – SUMMARY OF Significant Accounting Policies, continued
Loss
per Share
Basic
net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during
the period. Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive, potential
common shares outstanding during the period. Potential common shares consist of the incremental common shares issuable upon the
exercise of stock options and warrants (using the treasury stock method). The computation of basic net loss per share for the
three and nine months ended September 30, 2018 and 2017 excludes potentially dilutive securities. The computations of net loss
per share for each period presented is the same for both basic and fully diluted.
Potentially
dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because
the effect of their inclusion would have been anti-dilutive.
|
|
For the Nine Months
Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Warrants to purchase shares of common stock
|
|
|
6,861,670
|
|
|
|
3,873,086
|
|
Options to purchase shares of common stock
|
|
|
2,416,664
|
|
|
|
1,321,996
|
|
Total potentially dilutive securities
|
|
|
9,278,334
|
|
|
|
5,195,082
|
|
Recent
Accounting Pronouncements
Management
does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material
effect on the accompanying condensed consolidated financial statements, other than those disclosed below or in the Company’s
Annual Report on Form 10-K filed with the SEC on April 2, 2018.
In
August 2016 the FASB issued Topic ASU No. 2016-15 “Statement of Cash Flows (Topic 230) – Classification of Certain
Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 clarifies diversity in practice in how certain
cash receipts and cash payments are presented and classified in the statement of cash flows. The Company adopted ASU 2016-15 on
January 1, 2018 and it has not had a material impact on its condensed consolidated statements of cash flows.
In
November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU
2016-18”). ASU 2016-18 amends the classification and presentation of changes in restricted cash or restricted cash equivalents
in the statement of cash flows. The Company adopted ASU 2016-18 on January 1, 2018 and it has not had a material impact on its
condensed consolidated statements of cash flows.
In
May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update “ASU” No.
2014-09, Revenue from Contracts with Customers (Topic 606) which was subsequently amended by ASU 2015-14, ASU 2016-08, ASU 2016-10,
ASU 2016-12, ASU 2016-20, and ASU 2017-13. These ASUs outline a single comprehensive model for entities to use in accounting for
revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific
guidance. The guidance includes a five-step framework that requires an entity to: (i) identify the contract(s) with a customer,
(ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction
price to the performance obligations in the contract, and (v) recognize revenue when the entity satisfies a performance obligation.
In July 2015, the FASB deferred the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017.
A full retrospective or modified retrospective approach is required. The Company has adopted ASU No. 2014-09 effective January
1, 2018.
The
Company has elected to apply the modified retrospective method and there was no impact on the condensed consolidated financial
statements. Accordingly, the new revenue standard has been applied prospectively in the Company’s condensed consolidated
financial statements from January 1, 2018 forward and reported financial information for historical comparable periods will not
be revised and will continue to be reported under the accounting standards in effect during those historical periods.
The
Company performed an analysis and determined that its revenues are not within the scope of ASC 606, and as such, the Company determined
that its methods of recognizing revenues have not been impacted by the new guidance.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
4 – MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY
The Company’s mining properties acquired on August 18, 2014 that the Company retains as of September 30, 2018, include:
San Rafael Uranium Project located in Emery County, Utah; The Sunday Mine Complex located in western San Miguel County, Colorado;
The Van 4 Mine located in western Montrose County, Colorado; The Sage Mine project located in San Juan County, Utah, and San Miguel
County, Colorado. These mining properties include leased land in the states of Colorado and Utah. None of these mining properties
were operational at the date of acquisition.
The
Company’s mining properties acquired on September 16, 2015 that the Company retains as of September 30, 2018, include Hansen,
North Hansen, High Park, Hansen Picnic Tree, and Taylor Ranch, located in Fremont and Teller Counties, Colorado. The Company also
acquired the Keota project located in Weld County, Wyoming and the Ferris Haggerty project located in Carbon County Wyoming. These
mining assets include both owned and leased land in the states of Utah, Colorado and Wyoming. All of the mining assets represent
properties which have previously been mined to different degrees for uranium.
As
the Company has not formally established proven or probable reserves on any of its properties, there is inherent uncertainty as
to whether or not any mineralized material can be economically extracted as originally planned and anticipated.
On
September 16, 2015, in connection with the Company’s acquisition of Black Range, the Company assumed an option and exploration
agreement (the “Option and Exploration Agreement”) with STB Minerals, LLC, a Colorado limited liability company (“STB”).
The Option and Exploration Agreement gives the Company the right to purchase 51% of the mineral rights of specific areas of the
Hansen and Picnic Tree deposits (for which the Company already holds 49% of the rights). If the Company were to exercise its option
under the Option and Exploration Agreement, it would require the Company to (a) make a cash payment of $2,500,000 immediately
upon exercise; (b) issue shares of common stock to STB amounting to a value of $3,750,000 immediately upon exercise; and (c) issue
shares of common stock to STB amounting to a value of $3,750,000 on the date that is 180 days following exercise. The Option and
Exploration Agreement was scheduled to expire by its terms on July 28, 2017 if not exercised.
The
Option and Exploration Agreement provided an extension for an “event of force majeure”. Under this clause, the
Company would receive an extension of the period during which it could exercise its option if it experiences an unreasonable delay
outside its control that prevents it from exercising the option. On May 10, 2017, the Company provided to STB a notice that
it was exercising the force majeure clause due to the delay by government regulators in licensing the Company’s ablation
technology and permitting mining at the Hansen property. STB has contested the Company’s finding that an event of force
majeure has occurred. Ongoing negotiations continued until September 21, 2017 when the Company and STB agreed to settle the matter
through the pre-established arbitration mechanism. Prior to the commencement of arbitration, a settlement was agreed to on February
28, 2018 through the execution of an Amendment of Option and Exploration Agreement. As consideration, the Company paid STB a $20,000
extension payment and granted STB the right to seek a bona fide written offer over the remaining term, and agreed to the removal
of the force majeure clause from the agreement. The Company received an extension until July 28, 2019 and a right of first refusal
to match any bona fide written offer. Hence the Company already controls 49% of the resource property and retains an option to
purchase the 51% of the resource property that the Company does not already control for the duration of the agreement. Further
the Company believes the execution of this agreement is without financial implications, and as such, the Company has not made
any adjustment to these condensed consolidated financials related to this matter.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
4 – MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY, CONTINUED
A
prior owner of the Van 4 Mine had been granted a first Temporary Cessation from reclamation of the mine by the Colorado Mined
Land Reclamation Board (“MLRB”) which was set to expire June 23, 2017. Prior to its expiration, PRM formally requested
an extension through a second Temporary Cessation. PRM subsequently participated in a public process which culminated in a hearing
on July 26, 2017. Prior to the hearing, three non-profit organizations who pursue environmental and conservation objectives filed
a brief objecting to the extension. The MLRB board members voted to grant a second five-year Temporary Cessation for the Van 4
Mine. Thereafter the three objecting parties filed a lawsuit on September 18, 2017. The MLRB was named as the defendant and PRM
was named as a party to the case due to the Colorado law requirement that any lawsuit filed after a hearing include all of the
parties to the proceeding. The plaintiff organizations were seeking for the court to set aside the board order granting a second
five-year temporary cessation period to PRM for the Van 4 Mine. The Colorado state Attorney General was defending this action
in the Denver Colorado District Court. On May 8, 2018, the Denver Colorado District Court ruled in favor of PRM, whereby the additional
five-year temporary cessation period was granted.
The
Company’s mineral properties and ablation intellectual property are:
|
|
As of
|
|
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
Mineral properties
|
|
$
|
11,681,720
|
|
|
$
|
11,645,218
|
|
Ablation intellectual property
|
|
$
|
9,488,051
|
|
|
$
|
9,488,051
|
|
Oil
and Gas Lease and Easement
On
July 18, 2017, an oil and gas lease became effective with respect to minerals and mineral rights owned by the Company of approximately
160 surface acres of the Company’s property in Colorado. As consideration for entering into the lease, the Company received
$120,000 during the third quarter of 2017. The lease will be in force for an initial term of three years and may be extended by
the lessee at 150% of the initial rate. The lessee has also agreed to pay the Company a royalty of 18.75% of the lessee’s
revenue attributed to oil and gas produced, saved, and sold attributable to the net mineral interest. The Company is recognizing
the initial payment incrementally over the term of the lease.
On
February 26, 2018, the Company entered into a further agreement with the same entity as the oil and gas lease to provide them
with an easement to an additional part of the Company’s property solely for the purposes of transporting the oil and gas
extracted via a pipeline. As consideration for the easement, the Company received $36,960 during the first quarter of 2018. The
Company is recognizing this payment incrementally over the eight year term of the easement.
During
the three months ended September 30, 2018 and 2017, the Company recognized aggregate revenue of $11,155 and $10,000, and for the
nine months ended September 30, 2018 and 2017 the Company recognized aggregate revenue of $33,465 and $10,000, respectively, under
these oil and gas lease arrangements.
Right-of-way
grant agreement
On
July 1, 2018, the Company entered into a right of way agreement with a third party, whereby, the Company has granted
“right of way” access to a portion of its mineral properties in exchange for an up front payment of $3,624. The
Company is recognizing this payment incrementally over the term of the right-of-way agreement.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
4 – MINERAL ASSETS, ABLATION INTELLECTUAL PROPERTY AND OTHER PROPERTY, CONTINUED
Reclamation
Liabilities
The Company’s mines are subject to certain asset retirement
obligations, which the Company has recorded as reclamation liabilities. The reclamation liabilities of the United States mines
are subject to legal and regulatory requirements, and estimates of the costs of reclamation are reviewed periodically by the applicable
regulatory authorities. The reclamation liability represents the Company’s best estimate of the present value of future
reclamation costs in connection with the mineral properties. The Company determined the gross reclamation liabilities of the mineral
properties as of September 30, 2018 and December 31, 2017, to be approximately $888,991 and $820,434, respectively. During the
three months ended September 30, 2018 and 2017, the accretion of the reclamation liabilities was $2,729 and $2,561, and for the
nine months ended September 30, 2018 and 2017 was $7,942 and $6,588, respectively. The Company expects to begin incurring the
reclamation liability after 2054 and accordingly, has discounted the gross liabilities over their remaining lives using a discount
rate of 5.4% to net discounted aggregated values as of September 30, 2018 and December 31, 2017 of $221,557 and $196,821, respectively.
The gross reclamation liabilities as of September 30, 2018 are secured by certificates of deposit in the amount of $888,991.
On
April 11, 2018, the Company received notice from the Colorado Division of Reclamation, Mining and Safety (“CDRMS”)
in regard to its reclamation liability. CDRMS has recalculated the Company’s estimated future reclamation liability, which
would require the Company to increase its certificates of deposit that secure its reclamation liability by $68,517. The Company
had until June 8, 2018 to comply with or appeal the determination. On August 7, 2018, the Company paid CDRMS $68,517 in additional
reclamation bonds to satisfy their requirement.
Reclamation
liability activity for the nine months ended September 30, 2018 and 2017 consists of:
|
|
For the nine months ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Beginning balance
|
|
$
|
196,821
|
|
|
$
|
403,639
|
|
Accretion
|
|
|
7,942
|
|
|
|
6,588
|
|
Additions
|
|
|
16,794
|
|
|
|
-
|
|
Ending Balance
|
|
$
|
221,557
|
|
|
$
|
410,227
|
|
NOTE
5 – Accounts Payable and Accrued Liabilities
Accounts
payable and accrued liabilities consisted of:
|
|
As of
|
|
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
Trade accounts payable
|
|
$
|
291,595
|
|
|
$
|
453,618
|
|
Accrued liabilities
|
|
|
161,760
|
|
|
|
148,398
|
|
|
|
$
|
453,355
|
|
|
$
|
602,016
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
6
– Notes Payable
EFHC
Note
On August 18, 2014, in connection with the purchase of certain
of the mineral properties, the Company entered into a note payable with Energy Fuels Holding Corporation (“EFHC”)
(the “EFHC Note”) for $500,000. The EFHC Note bears interest at a rate of 3.0% per annum and is secured by a first
priority interest in certain of the Company’s mineral properties. On the date of the purchase, the Company recorded the
EFHC Note net of a discount for interest of $73,971 at a rate of 4% per annum, resulting in a total effective interest rate of
7% per annum. The discount is being amortized using the effective interest method over the life of the loan. All principal on
the EFHC Note was due and payable on August 18, 2018 and interest on the EFHC Note was due and payable annually beginning August
18, 2015. Prior to the original August 18, 2018 maturity, the Company and EFHC modified the EFHC Note to extend the maturity date
to September 4, 2018. On August 31, 2018, the Company paid the EFHC Note in full.
Notes
Payable Summary
Notes
payable consisted of:
|
|
Principal
|
|
|
Discount
|
|
|
Balance, Net
of Discount
|
|
|
Current
|
|
|
Non-Current
|
|
September 30, 2018
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
$
|
500,000
|
|
|
$
|
12,550
|
|
|
$
|
487,450
|
|
|
$
|
487,450
|
|
|
$
|
-
|
|
The
Company’s total interest expense, net, consisted of:
|
|
For the Three Months Ended September 30,
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Interest expense, notes payable
|
|
$
|
2,609
|
|
|
$
|
3,781
|
|
|
$
|
13,830
|
|
|
$
|
13,381
|
|
Amortization of discount on notes payable
|
|
|
2,801
|
|
|
|
4,833
|
|
|
|
12,550
|
|
|
|
29,889
|
|
Accretion of reclamation liabilities
|
|
|
2,729
|
|
|
|
2,561
|
|
|
|
7,942
|
|
|
|
6,588
|
|
Other interest expense
|
|
|
-
|
|
|
|
83
|
|
|
|
-
|
|
|
|
1,072
|
|
Interest income
|
|
|
(276
|
)
|
|
|
(347
|
)
|
|
|
(589
|
)
|
|
|
(1,275
|
)
|
Interest expense, net
|
|
$
|
7,863
|
|
|
$
|
10,911
|
|
|
$
|
33,733
|
|
|
$
|
49,655
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
7 – COMMITMENTS
Russell
Fryer
On July 28, 2017, Russell Fryer was appointed the Company’s
Executive Chairman. On November 13, 2017, the Company entered into a consulting agreement with an affiliate of Mr. Fryer. The
agreement became effective on July 28, 2017 and, pursuant to its terms, expires on December 31, 2018. The agreement may be terminated
by either party with 90 days’ notice. The agreement provides for compensation of $15,000 per month and an annual bonus at
the discretion of the Board of Directors. Pursuant to the agreement, if a change of control occurs wherein the consideration in
such change of control is more than USD $2.00 per share, the Company is required to pay a lump sum in the amount of $350,000.
On January 29, 2018, the Company provided the requisite 90-day notification to terminate the consulting agreement, effective April
30, 2018. On May 1, 2018, following the termination of this consulting contract, Mr. Fryer resigned as director and executive
chairman of the Board of Directors.
Vanadium
Joint Venture
On
June 1, 2018, the Company signed a letter agreement with Battery Mineral Resource Nevada, Inc. (“BMR”) to form a joint
venture for vanadium development at the Sage Mine.
Pursuant
to the agreement, BMR will underwrite the cost of scoping, engineering and technical studies during the due diligence period to
prepare for commencing pre-production work for resumption of production. Subsequent to the due diligence work program, BMR has
the option to enter into a definitive joint venture agreement which will trigger an additional buy-in payment to the Company.
Thereafter BMR and the Company will divide joint venture expenditures 50/50 and divide vanadium offtake 65/35 and uranium offtake
10/90. The higher percentage of vanadium offtake for BMR aligns with its rechargeable battery and energy storage mandate. The
agreed deal structure compensates the Company for the differential in the offtake percentage. The agreement provides BMR an additional
period to exercise a short-term option to purchase the entire Sage Mine Project. BMR also retains the right to not proceed beyond
due diligence.
Since the agreement was signed during the first week of June,
vanadium prices have risen from over $14 per pound to over $18 per pound. Consequently, rather than pursuing a joint
venture, BMR provided notification of their desire to exercise the purchase option. Both parties were working toward the
completion of a definitive agreement for the Sage Mine Project. On September 13, 2018, the Company and BMR mutually
terminated the letter agreement and ceased negotiations.
Supply
Contract
In
December 2015, the Company signed a uranium concentrates supply agreement with a major U.S. utility for delivery commencing in
2018 and continuing for a five year period through 2022. As the Company is not currently in production, a partial assignment agreement
was put in place whereby the assignee accepted the Company’s right to the Year 1 delivery of 125,000 pounds of natural uranium
concentrates. The delivery was made on May 1, 2018 and the assignee was paid the full consideration under the agreement. The Company
did not recognize any gain or loss on this transaction.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
8 – SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS
Authorized
Capital
The
holders of the Company’s common stock are entitled to one vote per share. Holders of common stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors out of legally available funds. Upon the liquidation,
dissolution, or winding up of the Company, holders of common stock are entitled to share rateably in all assets of the Company
that are legally available for distribution. As of September 30, 2018 and December 31, 2017, an unlimited number of common shares
were authorized for issuance.
Shares
issued for Accounts Payable
On
May 4, 2018, the Company issued 60,832 shares of its common stock in exchange for approximately $32,251 of its accounts payable
outstanding with certain creditors.
Private
Placement
On May 4, 2018, the Company completed a private placement of
909,622 units at a price of CAD $0.68 (USD $0.53) per unit for gross proceeds of CAD $618,543 (USD $466,402). The Company paid
USD $8,794 in offering costs and received net proceeds of USD $457,608. Each unit consisted of one share of common stock and a
warrant to purchase one-half of one share of common stock. Each warrant is exercisable at a price of CAD $1.15 and expires two
years from the date of issuance.
On July 30, 2018, the Company completed a private placement
of 2,525,526 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,717,358 (USD $1,319,096). The Company
paid USD $46,886 in offering costs and received net proceeds of USD $1,272,210. Each unit consisted of one share of common stock
and a warrant to purchase one-half of one share of common stock. Each warrant is exercisable at a price of CAD $1.15 and expires
two years from the date of issuance.
On August 9, 2018, the Company completed a private placement
of 1,907,088 units at a price of CAD $0.68 (USD $0.52) per unit for gross proceeds of CAD $1,296,820 (USD $1,000,000). The Company
paid USD $26,487 in offering costs and received net proceeds of USD $973,513. Each unit consisted of one share of common stock
and a warrant to purchase one-half of one share of common stock. Each warrant is exercisable at a price of CAD $1.15 and expires
two years from the date of issuance.
Incentive Stock Option Plan
The Company maintains an Incentive Stock Option Plan (the “Plan”)
that permits the granting of stock options as incentive compensation. Shareholders of the Company approved the Plan on June 30,
2008 and amendments to the Plan on June 20, 2013, and the Board of Directors approved additional changes to the Plan on September
12, 2015.
The purpose of the Plan is to attract, retain and motivate directors,
management, staff and consultants by providing them with the opportunity, through stock options, to acquire a proprietary interest
in the Company and benefit from its growth.
The Plan provides that the aggregate number of common shares
for which stock options may be granted will not exceed 10% of the issued and outstanding common shares at the time stock options
are granted. As of September 30, 2018, a total of 25,913,568 common shares were outstanding, and at that date the maximum number
of stock options eligible for issue under the Plan was 2,591,357.
On February 8, 2018, the Company granted options under the plan
for the purchase of an aggregate of 100,000 shares of common stock to a director. The options have an exercise price of CAD $1.00
(US $0.77 as of September 30, 2018) and vest one half on the date of grant and one half on December 31, 2018. One half of the options
expire on January 31, 2023 and the remaining options expire on December 31, 2023.
On September 24, 2018, the Company granted options under the plan for the purchase of an aggregate of
983,000 shares of common stock to several officers, directors, and consultants. The options have an exercise price of CAD $2.15
(US $1.67 as of September 30, 2018) and vest equally in three installments on the date of grant, on October 31, 2018, and on March
31, 2019. One third of the options expire on September 24, 2023, one third expire on October 31, 2023, and the remaining one third
expire on March 31, 2024.
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
NOTE
8 – SHARE CAPITAL AND OTHER EQUITY INSTRUMENTS, CONTINUED
Stock
Options
|
|
Number of Shares
|
|
|
Weighted Average Exercise
Price (USD)
|
|
|
Weighted Average Contractual Life (years)
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
Intrinsic
Value (USD)
|
|
Outstanding - January 1, 2018
|
|
|
1,846,996
|
|
|
$
|
1.92
|
|
|
|
|
|
|
$
|
0.42
|
|
|
|
|
|
Granted
|
|
|
1,083,000
|
|
|
$
|
1.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired, forfeited, or cancelled
|
|
|
(513,332
|
)
|
|
$
|
2.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding - September 30, 2018
|
|
|
2,416,664
|
|
|
$
|
1.76
|
|
|
|
3.98
|
|
|
$
|
0.48
|
|
|
$
|
804,654
|
|
Exercisable - September 30, 2018
|
|
|
1,711,331
|
|
|
$
|
1.82
|
|
|
|
3.56
|
|
|
$
|
0.47
|
|
|
$
|
574,503
|
|
The
Company’s stock based compensation expense related to stock options for the three months ended September 30, 2018 and 2017
was $90,210 and $0 and for the nine months ended September 30, 2018 and 2017 was $145,050 and $133,282, respectively. As of September
30, 2018, the Company had $450,452 in unamortized stock option expense, which will be amortized over a period of 0.5 years.
The
Company utilized the Black-Scholes option pricing model to determine the fair value of these stock options, using the assumptions
as outlined below.
|
|
February 8, 2018
|
|
|
September 24, 2018
|
|
Stock Price
|
|
|
CAD $0.52
|
|
|
|
CAD $2.14
|
|
Exercise Price
|
|
|
CAD $1.00
|
|
|
|
CAD $2.15
|
|
Number of Options Granted
|
|
|
100,000
|
|
|
|
983,000
|
|
Dividend Yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected Volatility
|
|
|
49
|
%
|
|
|
49
|
%
|
Weighted Average Risk-Free Interest Rate
|
|
|
1.64
|
%
|
|
|
2.94
|
%
|
Expected life (in years)
|
|
|
2.50 - 3.00
|
|
|
|
2.50-3.00
|
|
Warrants
|
|
Number of Shares
|
|
|
Weighted Average Exercise Price (USD)
|
|
|
Weighted Average Contractual Life (years)
|
|
|
Intrinsic Value (USD)
|
|
Outstanding, January 1, 2018
|
|
|
4,095,563
|
|
|
$
|
2.27
|
|
|
|
|
|
|
|
|
|
Issued
|
|
|
2,766,107
|
|
|
$
|
0.89
|
|
|
|
|
|
|
|
|
|
Outstanding - September 30, 2018
|
|
|
6,861,670
|
|
|
$
|
1.57
|
|
|
|
2.55
|
|
|
$
|
3,488,238
|
|
Exercisable - September 30, 2018
|
|
|
6,861,670
|
|
|
$
|
1.57
|
|
|
|
2.55
|
|
|
$
|
3,488,238
|
|
WESTERN URANIUM & VANADIUM CORP.
NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Stated in $USD)
(Unaudited)
Note
9 – Mining Expenditures
|
|
For the Three Months Ended September 30,
|
|
|
For the Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Permits
|
|
$
|
23,898
|
|
|
$
|
2,334
|
|
|
$
|
102,477
|
|
|
$
|
7,637
|
|
Maintenance
|
|
|
-
|
|
|
|
36,062
|
|
|
|
3,900
|
|
|
|
110,013
|
|
Contract Labor
|
|
|
-
|
|
|
|
4,525
|
|
|
|
11,050
|
|
|
|
4,525
|
|
Royalties
|
|
|
-
|
|
|
$
|
5,260
|
|
|
|
-
|
|
|
$
|
5,260
|
|
|
|
$
|
23,898
|
|
|
$
|
48,181
|
|
|
$
|
117,427
|
|
|
$
|
127,435
|
|
NOTE
10 – Related Party Transactions (Including Key Management Compensation)
The
Company has transacted with related parties pursuant to service arrangements in the ordinary course of business, as follows:
Pursuant
to a consulting agreement, a United States limited liability company owned by a person who was a director, and on July 28, 2017,
became the Company’s executive chairman, entered into a consulting agreement with the Company effective April 1, 2016 to
provide financial, advisory, and consulting services, including representing the Company to a variety of stakeholders for a six
month term ending on September 30, 2016. On October 1, 2016 the Company extended this agreement through January 31, 2017. Professional
fees for the three months ended September 30, 2018 and 2017 were $0 and $35,292, respectively, and $73,680 and $95,292 for the
nine months ended September 30, 2018 and 2017, respectively, related to this agreement. As of September 30, 2018 and December
31, 2017, the Company had $0 and $0, respectively, included in accounts payable and accrued liabilities payable to this entity.
On
April 1, 2017, the Company entered into a new consulting agreement with a United States limited liability company owned by a person
who was a director. The consulting agreement is to provide assistance with capital raising activities and other financial, advisory,
and consulting services for the period April 1, 2017 through June 30, 2017. At June 30, 2017 and the last day of each month thereafter,
the agreement may be extended by the Company on a month-to-month basis with seven days’ notice. The agreement has a monthly
fee of $15,000. Pursuant to the consulting agreement, if the Company completes a merger with a third party introduced by this
director whereby more than 50% of the Company’s then outstanding shares are transferred to that third party, the Company
is required to pay a lump sum in an amount of $350,000 to this entity. On January 29, 2018, the Company provided the requisite
90-day notification to terminate the consulting agreement, effective April 30, 2018, upon which date the agreement was terminated.
On May 1, 2018, upon termination of the agreement, this director resigned his positions as director and as executive chairman.
Prior
to the acquisition of Black Range, Mr. George Glasier, the Company’s CEO, who is also a director, transferred his interest
in a former joint venture with Ablation Technologies, LLC to Black Range. In connection with the transfer, Black Range issued
25 million shares of Black Range common stock to Seller and committed to pay AUD $500,000 (USD $361,219) to Seller within 60 days
of the first commercial application of the ablation technology. Western assumed this contingent payment obligation in connection
with the acquisition of Black Range. At the date of the acquisition of Black Range, this contingent obligation was determined
to be probable. Since the deferred contingent consideration obligation is probable and the amount estimable, the Company recorded
the deferred contingent consideration as an assumed liability in the amount of $361,219 and $390,350 as of September 30, 2018
and December 31, 2017, respectively.
NOTE
11 – SUBSEQUENT EVENTS
Warrant Exercises
Subsequent to September 30, 2018, the Company received CAD
$44,796 (USD $34,135) and issued 30,607 shares of common stock resulting from the exercise of warrants to purchase 30,607
shares of common stock.